Basketball teams are advancing to the Elite 8. Children are indulging in chocolate bunnies, and church attendance reaches its annual high. Easter weekend is a great time to relax and enjoy family for most, including most stockholders who are enjoying the day off. However, if you are a shareholder in SunEdison (SUNE) or Ultra Petroleum (NASDAQ:UPL), the Good Friday break has you dreading or hoping for next week to start.
For Ultra Petroleum stockholders, February 11th 2016 will be remembered as a terrible day. Those familiar with the stock, know that is the day that the stock price began to drop dramatically as fears of imminent bankruptcy started to circulate.
UPL faced some major challenges including debt maturities and covenant constraints. The stock dropped from $1.30 to just 19 cents in a matter of days. It appeared to be all over for UPL, as it marched towards the judgment day that was the debt payment scheduled for March 1st. However, just as the holdouts were beginning to lose hope, UPL announced they had reached an agreement and were granted a forbearance on their debt payment!
The stock experienced a face-ripping rally and shorts rushed to cover, sending the stock back up to $1.47.The waivers prevented potential defaults from occurring between March 1 to April 30: UPL had a $62M maturity payment due March 1 under one series of senior notes, a $40M interest payment also due March 1 under the senior notes, and a$26M interest payment due April 1. These postponements were based on terms and conditions specified in the waiver and amendment agreements.
Next week marks the countdown once again, as UPL begins the death march towards the April 30th deadline. Shareholders and speculators are watching closely to see if UPL can either reach another agreement with its creditors to push its debt burdens a second time or be able to pay the maturities and interest payments. This coming week we hope to see an update from company leadership giving insight into how the negotiations are going. Without a press release, there will most likely be another slow, steady decline in stock price from now until the end of the month as holdouts close their positions.
In a previous article, I talk about the quality of UPL's assets. It's quite a shame that they are in this position. They were once a 5 star stock in Morningstar's value list. I maintain my bearish sentiment on this company. This month is UPL's last chance for a significant turnaround in natural gas prices, or a white knight investor to step in and help their dire situation.
SunEdison Inc. (NYSE: ) has been in the news a lot lately as a report was released from DebtWire stating that the company was entering into DIP negotiations with one of their secondary lien creditors. This was following a steady decline from January when SUNE failed to submit their 2015 annual report on time. They have continued to kick the can down the road, and each time there has been a small rally from investors hoping that the report would be released. The can has now landed at where we are now.
Now whether you believe the DebtWire article was accurate or not (SunEdison said it was rumor and speculation) the fact is the stock price has set a new 52-week low. Thursday was likely the last chance to gamble on SUNE releasing their 10K because the next deadline is March 30th. From there it is up to the creditors to allow for a 15 day extension until April 14th. Based on the chart the last few months, SUNE moves in either direction very fast. Next week will be key because if something is not announced by then, this stock is headed south. Quick!
Now there have been some developments that look very promising for a next week release. They filed an 8K Thursday night barring directors and executive officers from contributing to their company fund. During the blackout period, plan participants will temporarily be unable to invest in the Stock Fund and will continue until the Company has filed its Annual Report.
Keep in mind that this blackout does not keep members from pulling money out of the fund, only from investing more into it. Which is why day traders went nuts on StockTwits asking, Could this mean something big is around the corner? With over 21,000 followers on StockTwits, all eyes are on SUNE this week, and even according to the SeekingAlpha poll, >80% of votes are now bullish. So could this be a huge short squeeze? Or will bulls be caught holding the bag? Next week will tell.
This does not mean that anyone expects the 10K to be positive, in fact it's probably grim, but what will matter is the forward guidance. If management quells the bankruptcy fears, the stock price will soar.
To be fair, there are very few "true" long investors on StockTwits. Many individuals who claim to be long, do not follow the tax code's definition of long. Instead, "long" is holding a position for a month or two. Many of the legitimate longs keep quiet on the boards because they invest based on long term potential rather than news.
With SUNE, the long term game is everything. Since their last report was September of last year, followers of SUNE are well aware of the potential. I won't bother rehashing 6 month old data for you. Instead we must wait for the 10K.
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Disclosure: I am/we are long SUNE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am expressing my own opinions, and encourage you to do your own due diligence before investing. Please understand your own risks involved with investing.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.